GR L 73893; (June, 1987) (Digest)
G.R. No. L-73893, June 30, 1987
MARGARITA SURIA AND GRACIA R. JOVEN, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT, HON. JOSE MAR GARCIA (Presiding Judge of the RTC of Laguna, Branch XXIV, Biñan, Laguna), and SPOUSES HERMINIO A. CRISPIN and NATIVIDAD C. CRISPIN, respondents.
FACTS
The private respondents, the Crispin spouses, filed a complaint for rescission of contract and damages against the petitioners, Suria and Joven. The action was based on a “Deed of Sale with Mortgage” dated March 31, 1975, covering a parcel of land. The Crispins alleged that the petitioners violated the contract by failing to pay the stipulated installments, with only one installment paid in September 1975, and all subsequent installments remaining unsettled despite repeated demands.
The petitioners filed a motion to dismiss the complaint, arguing that the Crispins were not entitled to the subsidiary remedy of rescission because the contract itself provided for the remedy of foreclosure of the mortgage. They contended that, under Article 1383 of the Civil Code, an action for rescission is subsidiary and cannot be instituted when other legal means for reparation exist. The trial court denied the motion to dismiss and the subsequent motion for reconsideration. The Intermediate Appellate Court affirmed the trial court’s orders, dismissing the petitioners’ petition for certiorari.
ISSUE
The primary issue is whether the seller-vendors (the Crispins) may resort to the judicial action for rescission under Article 1191 of the Civil Code, given that the “Deed of Sale with Mortgage” provides for the specific remedy of foreclosure in case of the buyers’ default in payment.
RULING
The Supreme Court granted the petition, reversing the appellate court’s decision. The legal logic is anchored on the nature of the contract and the applicable provisions of law. The contract in question is a “Deed of Sale with Mortgage,” which signifies that the sale was consummated, and the mortgage was constituted merely to secure the payment of the unpaid balance of the purchase price. By stipulating a mortgage as security, the parties effectively waived the pacto comisorio or the automatic resolution of the sale upon non-payment, as contemplated in Article 1504 of the Civil Code.
Consequently, the vendor’s proper and adequate remedy in case of the vendee’s default is the foreclosure of the mortgage, not rescission. The Court, citing Bonnevie v. Court of Appeals, emphasized that Article 1191, which provides for rescission in reciprocal obligations, is not applicable where the parties have agreed on a specific security and remedy. Since the contract provides for foreclosure, the action for rescission is subsidiary under Article 1383 and is unavailable. The Crispins’ proper course was to foreclose the mortgage. The Court ordered the petitioners to pay the balance of their indebtedness with legal interest; failure to do so would entitle the respondents to foreclose.